80-20 Investor Best of the Best Selection – March 2017 Update

Commentary

20 funds from last month's 29 Best of the Best (BOTB) Selection regained their position in March's shortlist. This is one of the largest number of retained funds for quite some time and is a reflection of how momentum has been driving the market. February was a good month for the BOTB with some huge wins. For example the Cavendish Technology fund made 6.7% over the month as did the Blackrock US Dynamic fund! In fact every fund in the BOTB made money in February with the only exception being Artemis Strategic Assets which fell 0.1%.

Once again those who took investment risks were rewarded, particularly if that exposure was via technology stocks, US equities or Smaller Companies. While the BOTB's European equity funds performed well (Marlborough European Multi-Cap was up 1.5%) they generally lagged other regions (as shown in this month's Heatmap). For example the FTSE 100 was up 3%. I was pleased with the BOTB average return, assuming all the funds were held in equal weight, of 2.65%. Especially given that the portfolio only had around a 70% exposure to equities. So a strong February built upon a strong January when the BOTB significantly outperformed the market.

A number of the funds that have dropped out of the BOTB only just missed being included and remain in the BFBS tables. So it's a case of steady as she goes for 80-20 Investors. However, there are some notable changes in the underlying asset mix this month. For starters the European equity exposure has dropped while the US exposure has increased significantly from last month and is now the largest component of the BOTB asset mix (see bottom of the post for a full breakdown). This is perhaps a reflection of the bullish sentiment surrounding the US equity market and the caution ahead of the French Presidential election and a possible Marine Le Pen victory. In terms of direct equity exposure the portfolio is still around 70%, on a par with last month .

It's also interesting to see that all the US equity funds are now medium risk (they were previously high risk) while the Marlborough European Multi-Cap has moved up into the high risk group. If you consider that US equities have not fallen by more than 1% in any given day for the last 90 days (that's the longest streak in a decade) perhaps the change in risk category by the algorithm was to be expected. .

At the foot of this article you can see how the 80-20 Investor Portfolio has continued to outperform the professional fund managers as well as the market since its launch over two and a half years ago. This month's update of the BOTB includes the same Asian fund from last month after a stellar performance (it was up 4.86%). Perhaps unsurprisingly a number of other Asian and emerging market funds only just missed out on being included in the BOTB this month. If you look at these sectors in the Best Funds by Sector (BFBS) tables you will see the strong returns over the last month.

The new BOTB's bond holdings are once again exclusively UK high yield bond funds that tend to have a lower duration, which has remained favourable in this environment. In addition the mixed asset funds have cemented themselves further in the low risk end of the BOTB list.

One final thing to note is that the Schroder Monthly High Income fund (which was in last month's BOTB list) has changed its name to the Schroder High Yield Opportunities fund (which is in this month's BOTB).

Below I list this month's selection in full with the 20 funds that regained their place in black while the new additions are in green. As usual, I have included the full list sorted alphabetically by name and then by risk category.

March's Best of the Best Selection - (A-Z by fund name)

(funds unchanged from last month are in black while new additions are in green)

Name	Sector	ISIN Code	Risk Level
7IM - AAP Income	Mixed Investment 0%-35% Shares	GB0033954024	Low risk
7IM - Unconstrained	Targeted Absolute Return	GB00B75MS619	Low risk
Artemis - Global Income	Global Equity Income	GB00B5N99561	Medium risk
Artemis - Monthly Distribution	Mixed Investment 20%-60% Shares	GB00B6TK3R06	Low risk
AXA - Framlington Global Technology	Technology & Telecom	GB00B4W52V57	High risk
AXA - Global High Income	Sterling High Yield	GB00B0T9V375	Low risk
BlackRock - US Dynamic	North America	GB00B87XJQ69	Medium risk
Cavendish - AIM	UK Smaller Companies	GB00B0JX3X39	High risk
Cavendish - Technology	Technology & Telecom	GB00B60SMN24	High risk
CF - Morant Wright Japan	Japan	GB0033010017	High risk
Fidelity - Global High Yield	Sterling High Yield	GB00B7K7SQ18	Low risk
FP - Apollo Multi Asset Cautious	Mixed Investment 20%-60% Shares	GB00B3FPDY55	Low risk
Henderson - Global Technology	Technology & Telecom	GB0007698847	High risk
Investec - Cautious Managed	Mixed Investment 20%-60% Shares	GB00B8NZ3M08	Low risk
M&G - Global Dividend	Global	GB00B46J9127	Medium risk
M&G - Recovery	UK All Companies	GB00B7759Y38	Medium risk
Man GLG - Japan Core Alpha	Japan	GB00B3F46Y30	High risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	High risk
Marlborough - Far East Growth	Asia Pacific Excluding Japan	GB00B0NVCN62	High risk
Neptune - Global Alpha	Flexible Investment	GB0031190555	Medium risk
Old Mutual - Cirilium Moderate	Mixed Investment 40%-85% Shares	GB00B2Q8TP98	Low risk
Premier - Diversified	Mixed Investment 40%-85% Shares	GB00B8BJV423	Low risk
R&M - UK Equity Long Term Recovery	UK All Companies	GB00B614J053	Medium risk
Royal London - US Growth Trust	North America	GB0030038359	Medium risk
Schroder - High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Schroder - Tokyo	Japan	GB00B4SZR818	High risk
Schroder - UK Dynamic Smaller Companies	UK Smaller Companies	GB0007220360	High risk
TB Saracen - Global Income & Growth	Global Equity Income	GB00B8MG4091	Medium risk
UBS - US Equity	North America	GB00B7V68L26	Medium risk
Wise Investments - TB Wise Investment	Flexible Investment	GB0034272533	Medium risk

March's Best of the Best Selection - (grouped by risk)

Here is March's shortlist grouped by their risk category (funds unchanged from last month are in black while new additions are in green):

Name	Sector	ISIN Code	Risk Level
7IM - AAP Income	Mixed Investment 0%-35% Shares	GB0033954024	Low risk
7IM - Unconstrained	Targeted Absolute Return	GB00B75MS619	Low risk
Artemis - Monthly Distribution	Mixed Investment 20%-60% Shares	GB00B6TK3R06	Low risk
AXA - Global High Income	Sterling High Yield	GB00B0T9V375	Low risk
Fidelity - Global High Yield	Sterling High Yield	GB00B7K7SQ18	Low risk
FP - Apollo Multi Asset Cautious	Mixed Investment 20%-60% Shares	GB00B3FPDY55	Low risk
Investec - Cautious Managed	Mixed Investment 20%-60% Shares	GB00B8NZ3M08	Low risk
Old Mutual - Cirilium Moderate	Mixed Investment 40%-85% Shares	GB00B2Q8TP98	Low risk
Premier - Diversified	Mixed Investment 40%-85% Shares	GB00B8BJV423	Low risk
Schroder - High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Artemis - Global Income	Global Equity Income	GB00B5N99561	Medium risk
BlackRock - US Dynamic	North America	GB00B87XJQ69	Medium risk
M&G - Global Dividend	Global	GB00B46J9127	Medium risk
M&G - Recovery	UK All Companies	GB00B7759Y38	Medium risk
Neptune - Global Alpha	Flexible Investment	GB0031190555	Medium risk
R&M - UK Equity Long Term Recovery	UK All Companies	GB00B614J053	Medium risk
Royal London - US Growth Trust	North America	GB0030038359	Medium risk
TB Saracen - Global Income & Growth	Global Equity Income	GB00B8MG4091	Medium risk
UBS - US Equity	North America	GB00B7V68L26	Medium risk
Wise Investments - TB Wise Investment	Flexible Investment	GB0034272533	Medium risk
AXA - Framlington Global Technology	Technology & Telecom	GB00B4W52V57	High risk
Cavendish - AIM	UK Smaller Companies	GB00B0JX3X39	High risk
Cavendish - Technology	Technology & Telecom	GB00B60SMN24	High risk
CF - Morant Wright Japan	Japan	GB0033010017	High risk
Henderson - Global Technology	Technology & Telecom	GB0007698847	High risk
Man GLG - Japan Core Alpha	Japan	GB00B3F46Y30	High risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	High risk
Marlborough - Far East Growth	Asia Pacific Excluding Japan	GB00B0NVCN62	High risk
Schroder - Tokyo	Japan	GB00B4SZR818	High risk
Schroder - UK Dynamic Smaller Companies	UK Smaller Companies	GB0007220360	High risk

The funds that dropped out of the Best of the Best Selection

For reference the funds from last month that dropped out of the 80-20 Investor Best of the Best list are listed below. Many of them remain in the Best funds by Sector selection:

Name	Sector	ISIN Code	Risk Level
Artemis - Strategic Assets	Flexible Investment	GB00B3VDD431	Medium risk
Baillie Gifford - Japanese	Japan	GB0006011133	High risk
Cavendish - Opportunities	UK All Companies	GB0032212283	High risk
IFSL - Brooks Macdonald Defensive Capital	Targeted Absolute Return	GB00B61MR835	Low risk
JOHCM - UK Equity Income	UK Equity Income	GB00B03KR500	Medium risk
Jupiter - UK Smaller Companies	UK Smaller Companies	GB0004911870	High risk
R&M - UK Equity High Alpha	UK All Companies	GB00B3D79W34	Medium risk
Schroder - European Alpha Plus	Europe Excluding UK	GB00B7LDKR32	Medium risk
Schroder - Global Equity Income	Global	GB00B76V7M69	Medium risk

The Asset mix

The current asset mix of the new Best of the Best Selection is shown below with last month's figures in brackets:

• Global Fixed Interest 12% (12%)
• Alternatives 11% (10%) - mostly absolute return strategies
• UK Corporate Fixed Interest (i.e UK bonds) 2% (2%)
• North American Equities 22% (12%)
• European Equities 7% (9%)
• Japanese Equities 11% (11%)
• Property 0% (0%)
• UK Equities 18% (24%)
• Cash 4% (8%)
• Asian equities 0% (0%)
• Asia Pacific Emerging equities 0% (0%)
• Other international equities 13% (12%) which includes Asian equities

80-20 Investor's outperformance continues

As you know the Best of the Best Selection is the shortlist of the best funds highlighted by our 80-20 Investor algorithm split into high, medium and low risk categories. This shortlist is updated at the start of every month.

The green line in the chart below (click to enlarge) shows how a portfolio would have performed since inception (in August 2014) if it had been split equally between the Best of the Best Selection funds and then switched each month when each new shortlist was published. I have also charted the performance against that of the FTSE 100 (the black line) and the average cautious managed fund (blue line) and the average managed fund with up to 85% equity exposure (red line). In reality the 80-20 Investor's asset allocation typically lies between these two as it usually has 60-85% exposure to equities at any one time. So they provide a good comparison of how fund managers with a similar remit have fared over the same period.

As you can see, since launch in August 2014 the 80-20 Investor portfolio has HUGELY outperformed the average managed fund and the market. The large spike in performance in the 80-20 Investor portfolio on the right hand side of the chart is where the portfolio rallied after the Brexit referendum while global markets plummeted.

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